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Short Sale
What is a short sale?
A short sale is actually very simple to explain, yet very hard to negotiate. In a nutshell, a short sale is when the bank accepts a payoff via a sale that is less than what you owe. Even if you owe about the same as the value of your home, you most likely will still have to do a short sale.
Here’s why:
1st Mortgage Payoff: $375,000
2nd Mortgage Payoff: $75,000
Total Payoff: $450,000
Current Value: $450,000
Costs of sale: Attorney Fees, Transfer Fees, Home Inspection Items, Realtor Fees, Misc Costs. All of these costs put you in a negative equity situation. Don’t Worry ~ There is a way out!!
How do you get a bank to accept a short sale?
The art of negotiating a short sale comes with experience only! You don’t just know how to negotiate a short sale by taking a class, reading a book or surfing the net ~ it comes with experience!!! It involves negotiation with the loss mitigation department of the mortgage company or companies if there are 1st and 2nd mortgage notes. Each mortgage company is different and they do not all play the game the same way! DO NOT trust just any agent to list, sell and negotiate your short sale. If they can’t explain the process in depth, RUN AWAY!!!!
Why would a bank agree to accept less than what is owed?
A short sale is a win / win situation for everyone involved. For the seller, they get to avoid a negative foreclosure on their credit. For the bank they get to avoid the costs of foreclosure, which are massive.
Who pays all of the associated costs of a short sale?
This is all in the negotiation process, but the simple answer is this: If you don’t have any money, then the bank will pay the costs that cannot be covered. They are very willing to do this in most cases to avoid foreclosure. Banks are not in the home ownership business!!
Foreclosure vs Short Sale
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Cost
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Short Sale
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Foreclosure
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Loss on Mortgage Balance
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Title Agency Fees
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Listing Agent Fees
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Selling Agent Fees
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Attorney Fees (trustee)
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Holding Property (6+ months)
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Auction Costs
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Loss of Mortgage Payments
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Additional Loss on Mortgage Balance (Purchased by Investor As-Is)
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